Research In Motion's Pullback is an Opportunity

Research in Motion (RIMM), the maker of the popular Blackberry smartphone ran into some headwinds last month when it missed earnings estimated by a penny. That was enough to send the stock down 10% from a near high of $145. The market pull back further pushed the stock down all the way to $115 last week. RIMM might have missed earnings by a penny, but its earnings were far from shabby at 115% over last year. The company stated higher R&D costs and operating expenses both of which would help their business in the long run.

Many people compare RIMM to Nokia (NOK) - that RIMM is too expensive relative to the market share it has in wireless handsets. However, Nokia's handsets tend to be cheaper, with lower margins, and Nokia does not have or charge its users for a proprietary network that delivers email instantaneously.

The Bold and Thunder are both new cutting edge phones that promise to take market share from the likes of Nokia, Motorola (MOT) and Samsung. Both are slated for release sometime in Q3 of this year.

RIMM also seems to be growing overseas, specifically in China, where it recently partnered with the world largest mobile phone provider China Mobile (CHL). I believe this pull back is an opportunity to buy. The stock has shown resilience near its 200 day moving average in the past and is currently right above it. I recommend buying RIMM at current levels.

Full Disclosure: I own RIMM but my position can change anytime without notice.

Comments

[Andy Singh:]

The reason is clearly that the street thinks Apple is a better company that will execute it's iPhone strategy better than RIMM and hence make big inroads into their market share. This is why I like and bought Apple stock, (see details at my website/blog) and believe it is a $200 stock by the end of summer.

However if Apple missess forecasts or earnings then all bets are off and RIMM will surge. So buying RIMM now is a bet that Apple will fail. Otherwise go with the market. Enter your comment here

2008 Jul 08 12:05 PM

[Randall Arnold:]

The iPhone is, as are most Apple products, hyped beyond its realistic promise. RIMM has the proven track record here. Opportunity indeed.

2008 Jul 08 12:26 PM

[sam4786:]

While RIMM did miss its earning estimate, little attention is being paid to the fact that they beat last years earnings by 115%. RIMM is up today, and I predict it will close up again tomorrow. I was checking sentiment at predictwallstreet.com/... and while it is relativley neutral, others still predict it will close up again tomorrow at PredictWallStreet.com. I think this “cult stock” will be profitable in the long run as long as you understand its temperaments and that is indeed a volatile stock. RIMM has high growth prospects and in my opinion, smart phones will be the only phones in the near future.

2008 Jul 08 12:37 PM

[Faisal Laljee:]

I wouldn't be surprised if Apple stock drops a little. iPhone sales have got to be very weak in the 2nd quarter given that people would have been waiting for the new iPhone. Of course, once the new iPhone is released, sales will hit the 10 million unit mark easily before the end of the year, but then their guidance during the upcoming release is not expected to be very good given that they like to sandbag their numbers. I expect the stock to pull back after earnings.

2008 Jul 08 01:03 PM

[Shorting Sh...:]

"I wouldn't be surprised if Apple stock drops a little. iPhone sales have got to be very weak in the 2nd quarter...."

Keep hoping!
The expected 'weak' 2nd quarter for iphone sales is the reason AAPL is at the $175 level instead of the $200 level, and RIM missed even though there was virtually no competition from Apple.
Wait to see the end of the current quarter when iphones are available in 2000+ stores.

2008 Jul 08 06:19 PM

[melante:]

Honestly, to me, going long on a stock with a PE of 45 in a bear market seems like a suicide.... good luck!

2008 Jul 09 12:06 AM

[Nextel Acce...:]

The Blackberry is such a better product.

2008 Jul 10 08:23 PM

[Dan Jacome:]

congrats, dude: henry blodget quoted you over @ Clusterstock.com : ) -

2008 Jul 13 03:17 AM

[Dan Jacome:]

I talked to a top 10 holder after RIMM missed: he still liked the name, but I couldn't tell if he was holding onto it all or trimming...

meat of the convo suggested he thinks earnings normalize after this ad spend and RIMM protects its share...well, ya, but even if EPS remains intact, there is no certainty how much the Street will pay for them...

PEs are driven by growth rates and discount rates: sadly, in RIMMS case, risk could be going up while growth is going south...100 is the next stop, if AAPL sell thru is robust, 80 here we come....

2008 Jul 13 03:21 AM

[Jewbacca:]

NO SHT SHERLOCK, You call that a anal...list view. I call that common sense....geeeee a stock just lot 25% in 2 days and you will see a pullback.
QUOTE:

"The Bold and Thunder are both new cutting edge phones that promise to take market share from the likes of Nokia, Motorola (MOT) and Samsung. "


Cutting edge!!! Cutting edge??? you must mean cookie cutter (as in copies).

You better hope you get a price bounce in the near future or people on this board will be calling you the azzclown of the year.

Just have a gander at all the tech earning this afternoon, do you really think this one trick pony will beat in next Q earnings?

2008 Jul 21 07:39 PM